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DRPs: Don’t Go Away Mad, Just Go Away

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Since so many changes are taking place on the repairer-insurer-consumer horizon, all anyone can do is speculate about the future. Not being a betting man (I’ve never even bought a lotto ticket), I’d venture that the answers to Bill O’Keefe’s questions might be “yes” and “no”–but not necessarily in that order.

At a recent NACE, Brian Sullivan, a man who makes his living studying and reporting on insurers, stated that insurers wouldn’t be getting into the repair business. Yet within months, Allstate Insurance had bought Sterling.

So much for informed speculation.
I will guarantee you, though, that insurers will continue to use any means –legal or illegal, ethical or not –to grow their business. But that’s not speculation. That’s history. And history nearly always repeats itself.

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So let’s forget speculation on our future and, rather, concentrate on some things that you and I and others like us can do that are most likely to promote future shop independence.

For the record, I believe thousands of shop owners in this country still desire to perform repairs to the best of their ability and to be independent of the mandates of a third-party payer. These shops would like nothing more than to compete on a level playing field, be paid honestly for their services and materials, and make a reasonable profit. But over the years, the collision repair industry, under steadily increasing insurer pressure, has slowly let its guard down. And insurers, naturally, have taken up the slack.

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Independence, no matter the context, has always been a vigilant, uphill battle. As long as people have populated this earth, the broad picture has been that there are those who’ve focused on lining their own pockets with others’ rights and independence. Direct repair isn’t all that far removed from indentured servitude, which in turn, isn’t that far removed from slavery.

Contrary to all that insurers would have us believe, be assured that the desire to remain independent is alive and well in the repair industry. Many are successfully remaining as independent as is possible in this industry. Even considering the present direction that insurer relations seems to be headed, I believe a certain number will remain independent, to some degree.

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Things Independents Can Count On
Count on the fact that our future will find insurers and related entities redoubling their efforts to control every square millimeter of the collision repair industry –and doing everything within their means to make those who’ve chosen to remain independent so unprofitable that they’ll cave in. Believe it when I tell you that insurers –through their DRP systems and with trillions of dollars of assets –are in a panic to get all, or at least a radically sufficient number of, shops securely under their thumb before these shops come to realize that insurers aren’t trustworthy.

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Many shops have been sufficiently anesthetized into believing they’re “better off red than dead.” Others are just playing along with the DRP game in hopes of selling out soon or at least holding on long enough for independent competition to drop dead. There are also some shops, seeing through rose-colored glasses, that believe insurers have the shop’s best interests in mind when tendering DRP contracts.

But, in my opinion, it’s only a matter of time before virtually all shops will recognize their regrettable mistake in trusting their business to insurers.

Dispelling Some Myths

Myth No. 1:
The fight for independence is lost. I wish I had a dollar for every time some “newbie” to the repair industry tried to convince me, with his polished pile of bull-pucky, that I’m the one who’s “out of touch with the future of collision repair” in working for collision repairer independence. Truth be known, these guilt-trippers have only one goal: building up their businesses quickly on your back and mine to sell out to another sucker before their fragile DRP relationship caves in on them.

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I believe we’d be surprised at the number of shops that have successfully remained independent and at how many former DRP shops –sick of the abuses, lies and corruptness that direct repair fosters –have voluntarily returned to being independents. (See sidebar called, “Ditching DRPs.”)

Myth No. 2:
Non-DRP shops aren’t non-DRP by choice –they’re just not good enough to get on DRPs. This second myth –propagated by insurers and, unfortunately, published in some trade publications –is that “all non-DRP shops are thus because they aren’t a high enough caliber or are otherwise unacceptable for insurers.”

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A local agent did everything short of begging on bended knee to convince me to go the direct-repair route with the company he represents. But when I asked him if he were in my shoes –and knowing the history of the company he represents and their future plans –if he’d be willing to live by the mandates his company demands of its DRP shops (the latest being forced use of at least 30 percent imitation and used parts), he admitted that he wouldn’t.

Another local shop quickly lapped up that contract after the shop that previously held it finally said, “Enough!” when the 30 percent parts mandate was added to their growing list of demands.

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Myth No. 3:
Insurers are prospering from direct-repair. A growing number of independent and DRP shops and insurer representatives believe insurers know they’re losing money to DRPs. This might well explain why insurers are so protective of their myriad pages of statistics they’ve collected from their DRP partners. Were the extent of these losses to see the light of day, stockholders would be outraged and heads would roll. But insurers have, I believe, allowed this imposition to continue for now as a tradeoff for shuffling much of their paperwork on to their DRP partners and for the many other “free” services, rental cars, free storage and the like.

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An insurer-representative friend put it this way: “Looking at just the cost of repairs alone [average DRP repair cost compared to average non-DRP repair], I have no doubt that insurers spend more on a DRP repair. From everything I’ve seen and heard, and all things considered, insurance companies pay more on a DRP repair.

“Any shop owner or manager who can run a body shop and survive in this day and age can either manipulate the numbers to offset the discounts and givebacks their programs demand or can take shortcuts to cut their costs enough to make money

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“The upper levels of insurance company management are pretty far removed from what’s actually happening at the appraiser/adjuster level. They depend on stats to tell them what’s what. But stats, like polls, say what the people compiling the results want them to say. Lots of jobs depend on how things look on paper.

“There’s also the mentality of the corporate executive, who doesn’t want to say anything negative that might mark him as someone who isn’t a ‘team player.’ “

There’s no free lunch, and there never has been. If insurer-subservient shops were losing money, they’d be dropping like flies, which they’re not.

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I believe that in the future when insurers have a sufficient number of shops under their thumb, they’ll be in a position to demand many additional concessions that decisively shift the scales in their favor. What most DRP shops can’t seem to comprehend, or refuse to believe, is the fact that while they’ve prospered from playing into insurers’ hands, electronic communications technology has advanced to the point that it’ll be virtually impossible in the near future to dupe insurers (including “funny time,” type of parts used, returned parts, actual costs of parts and the like).

I believe insurers view their present DRP losses as a small price to pay for attaining their ultimate future goal of complete control of the repair industry. So what can you and I as independents do to assure they never attain their goal?

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What’s an Independent Repairer to Do?
Running a squeaky-clean operation –which breeds an ultra-loyal customer base –and advertising that informs consumers of their rights and how you’ll uphold them will help you to maintain independence for the near future. But I’m not convinced these will sustain independents forever, considering the extreme pressure that insurer dollars, policy wording and advertising will exert.

The true answer, I believe, lies in how ambitiously we seek legal means of bringing the abusive, anti-competitive practices of insurers to the attention of consumers, the elected officials consumers vote into office and attorneys. The only thing insurers dread more than the wrath of consumers is punitive class-action lawsuits, which hang insurers’ dirty laundry where no one can miss seeing it.

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The consumer and the legal system are the keys to any and all reform of the present insurer-repairer system. While insurers have been busily preening their consumer image (consider the increase in insurers’ feel-good advertisements in every mode of media) and showing their supposed best side (that of consumer advocate), the repair industry has experienced rectal-cranial-fusion.

For those of you not suffering from this affliction, what can you do to compete with DRP shops? How can you remain competitive and successful when so many independents aren’t? Consider these tactics that work for me:

Additional services: If you’re in a small market area, you’ll likely have to supplement your income –as I have –with auto-related niches into which insurers haven’t yet gotten their fingers.

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Here are a few ideas to get you thinking:

    – Rental vehicles;
    – Auto detailing;
    – Mechanical repair;
    – Exhaust repairs and replacement;
    – Wheel alignment and suspension repair;
    – Air-conditioning (A/C) recharge and repair;
    – Spray-on bed liners;
    – Sandblasting/beadblasting;
    – Horse-trailer repairs (if the market is there, there’s money to be made repairing these pony palaces);
    – Quick repairs on older vehicles;
    – Complete re-paints on expensive vehicles;
    – Towing services;
    – Steam cleaning and pressure washing;
    – Aftermarket moldings, decals, pinstriping and ground effects; and
    – Auto glass replacement and repairs.
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For more information on offering additional services, search past issues of BodyShop Business using the key words, “horse trailers.” An article called, “Finding Your Niche,” will come up. I wrote this article a few years back for BSB, and it details how to branch out into specific services.

Marketing: Marketing may seem expensive, and usually is, but it’s one of those facts of life for the non-DRP shop that helps keep it independent and competitive. Well-established shops that do top-quality work can usually rely more on word-of-mouth (repeat and referral) customers. But for newer, less-established shops, heavy advertising and marketing are needed at times. (Tip: Ten little ads are better than one big one. Consistency and repetition are key.)

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But don’t limit yourself to only traditional types of promotions, such as Yellow Pages advertising or newspaper ads. For example:

– Have an anniversary open house each year. One shop’s approach: “At least twice each year, we compile a list from a Web site listing real-estate transactions of people who bought new homes in our market area. We send each a brochure and letter in which we try to educate them, emphasizing the fact that it’s their choice as to where their vehicle is repaired. Then we tell them how great we are. We also send out mailings –Christmas cards plus one other time each year –to existing customers, with a note and a few business cards, asking them to refer us to their friends, family and acquaintances. I also started regularly visiting the insurance agents we deal with, some of which don’t like their DRP shops and have begun referring customers to us.”

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– Sponsor local youth teams and organizations. This allows you to build customer loyalty for a fraction of the cost of other types of advertising. But be sure to show up at these events occasionally so the parents can put a face to the name of their kids’ sponsor.

– Donate free car washes to local Chamber of Commerce employees, local single mothers organizations, political funding banquets, the local senior citizens center, etc.

At our shop, we also do “extra” marketing of the other related services that we perform. And we start marketing these services as soon as potential customers walk through our door. We hand out an attractive full-color, one-page flier with minimal wording that our secretary produced from clip art. We briefly go over its high points and, by doing so, invariably bring in more work –whether that consumer has us perform additional work on his vehicle or tells his friends and they come to us.

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The idea in marketing is to make your shop a “household word,” something good that consumers will remember when they or a friend need your services. The more services you perform (the more times they pass through your doors), the more likely they’ll be to remember you after an accident and before they’re steered to a DRP shop by their insurer.

– Press releases: Every time we hire a new employee, our secretary writes up a brief press release on him (complete with their credentials, sometimes a photo, etc.), the name and address of our shop and the number of years we’ve been serving our community. Most newspapers are glad to get these, and they get your name out there.

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Do Something!
As independent collision repairers, time is not on our side.Long before direct repair and the anti-competitive steering that DRP agreements foster became a twinkle in enterprising insurers’ eyes, Edmond Burke stated the age-old obvious: “The only thing necessary for the triumph of evil is for good men to do nothing.”

If you’re concerned about the course our collision industry is headed, please contact me. I welcome your comments and concerns.

Writer Dick Strom and wife Bobbi own and operate Modern Collision Rebuild, a 10,000-square-foot shop, in Bainbridge Island, Wash. You can e-mail him at [email protected]

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